Swedish Match shares hit by U.S. cigars downturn

STOCKHOLM Fri Oct 11, 2013 6:46am EDT

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STOCKHOLM (Reuters) - Cigar and moist snuff maker Swedish Match AB (SWMA.ST) warned on Friday a tougher market for U.S. cigars would impact its earnings this year, sending its shares to a near six-month low.

Swedish Match, whose main products are "snus" or snuff pouches placed under the lip which remain popular in parts of Scandinavia, said weakness in U.S. cigar demand would push full-year profit for its second-largest unit below the 2012 level.

Swedish Match had already flagged tougher competition in the U.S. mass-market cigar business earlier this year but said competition had intensified, giving lower than expected third-quarter volumes and operating profit.

"We now anticipate operating profit for the other tobacco products segment in the third quarter to be in the range of 50 to 60 million Swedish crowns below the third quarter of the prior year," the company said in a statement.

The unit had an operating profit of 300 million crowns ($46.1 million) in the third quarter of 2012.

Swedish Match said full-year operating profit for the unit would be below the 1.16 billion crowns of 2012.

"They have had phenomenal growth and profit development in mass-market cigars, everyone knew this would slow down at some point and now it has," said David Hallden, analyst at UBS.

He said growth in the unit would now be at a more "normal" level and that the correction in Swedish Match shares was a buying opportunity.

In July, the company said it expected modest full-year profit growth in U.S. cigars and that to address the new competition the firm would increase marketing and the launch of a new budget brand.

The other tobacco products unit which includes cigars made up around 21 percent of total sales in 2012 and 29 percent of the company's operating profit.

Shares in Swedish Match were down 4.7 percent at 220.10 crowns by 0913 GMT.

(Editing by David Holmes)

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